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How Rising Mortgage Rates Can Impact Your Family Post-Divorce

Dividing the Marital Home

When considering a major life decision, at Meriwether & Tharp, we understand it is important to weigh the different areas of your life which will be impacted by your decision. When a married couple decides to divorce, resolving what to do with the marital home is a big decision. Below, we will discuss two ways parties divide the marital home.

Selling the Martial Home

The parties to a divorce may decide to sell the home for many reasons but most common are because neither party wants to remain in the home or because the parties cannot afford the home individually. Although is most consistent for the child(ren) for one party to retain the marital home, it may be emotionally difficult for the parent retaining the marital home to stay in the home where they once lived as a family with their ex-spouse.

In addition, if a spouse would like to retain the marital home, they must earn enough income to qualify for a refinance. Often, parties were able to afford the home with two incomes but the party wishing to retain the home cannot afford the mortgage on a single income.

When the divorcing parties sell the marital home, they usually use the money from the sale to pay off what is remaining of the mortgage and divide the remaining equity. Considering the state of the economy and rising mortgage rates, the parties may find it challenging to sell their home in a declining housing market or may not receive as much capital as they had hoped.

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One Party Purchases the Marital Home

As mentioned above, one party may choose to retain the marital home to provide consistency for the child(ren) or simply because they are fond of the house and do not want the added hassle of moving. If a party wishes to retain the marital home, he/she must be able to buy out the other party's equity using separate funds and have the earning capability to refinance the home in their individual name.

The party wishing to refinance the marital home must consider any cost to refinance, as well as rising mortgage rates, which will likely increase the monthly mortgage payment. If you are considering divorce, it may be helpful to speak with a family law attorney to evaluate the unique circumstances surrounding the division of assets and liabilities in your case.

Written by: Rebekah Ann James


Asset Division
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